Budget woes for NSW as another MP says he’ll quit

The NSW government is under pressure to cut spending and protect its forecast budget surpluses because of a $1.6 billion drop in estimated goods and services tax payments over the next four years.

Treasurer
Eric Roozendaal
is scheduled to release the half-year budget update early next month. It will include adjustments for the lower GST income, revealed by the federal government on Tuesday.

The state’s GST is expected to drop by $437 million this financial year alone, accounting for more than half of its forecast surplus. Mr Roozendaal told TheAustralian Financial Review in a statement yesterday the state faced “a severely diminished budget result, both for the current year and into the forward estimates".

However, he said the government planned to maintain its spending commitments for frontline services such as police, teachers and nurses.

“This reduction in GST was unexpected and indicates the volatility and risks associated with budget revenues," he said.

The budget result last financial year was buoyed by higher than expected stamp duty revenue but recent housing market indicators such as house price growth and auction clearance rates suggest that may have slowed.

Uncertainty surrounding the budget is a blow to the Keneally government, which has used its economic management through the financial crisis as one of its few selling points in the lead-up to the election in March.

It comes as the political argy-bargy heats up, with a 14th Labor MP,
Paul Gibson
, announcing his retirement, from the seat of Blacktown, at the election, which the government is expected to lose.

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Most of the departing Labor MPs hold seats expected to fall to the Coalition, but Mr Gibson is leaving a safe seat (held by a 22 per cent margin) to make room for upper house member and Transport Minister
John Robertson
to move to the lower house.

Mr Robertson, a former union leader and one of the main opponents to former premier
Morris Iemma
’s full electricity privatisation plans in 2008, is widely seen as the next Labor leader.

Opposition spokesman for state affairs
Chris Hartcher
said Premier
Kristina ­Keneally
was now a “lame duck leader".

Mr Gibson, who has been in Parliament for 22 years, criticised the government for being poll-driven. “People today out there don’t know what the Labor Party stands for any more," he said in a radio interview.

“We’ve moved so far away from our platform and our policy, and we’ve become poll-driven. Whatever is popular in the polls today is the line that we seem to take." Meanwhile, the NSW Business Chamber slammed a decision by Ms Keneally to guarantee a weekday public holiday when Christmas Day, Boxing Day or New Year’s Day fell on a weekend.

“This is another example of poor policy, designed to shore up union support, at the expense of the state’s 300,000 small businesses who potentially will have to provide up to six days of public holidays in a Christmas period," the chamber’s chief executive,
Stephen Cartwright
, said.

Adding to the government’s financial woes, its unfunded superannuation liabilities are attracting increased attention. The NSW auditor-general said yesterday the liabilities, which increased by half a billion dollars to $20.3 billion last financial year, “posed significant challenges for the government". The liabilities represent the money owed to politicians and public servants who signed up to generous superannuation schemes now closed to new members. The schemes guaranteed returns regardless of market performance. Including state-owned corporations, the liabilities amount to $34.5 billion.

Mr Roozendaal said the government was still on track to fully fund the liabilities by 2030. Early this year it used $510 million from the proceeds of the NSW Lotteries sale to reduce the liabilities.